Florida: Insurance commissioner orders further reduction in workers' comp rates

Florida employers may see an even greater reduction in their workers' compensation rates under a plan by Insurance Commissioner Kevin McCarty.

McCarty recently announced that he would not approve an August filing by the National Council on Compensation Insurance that recommends Florida decrease its workers' comp rates by an average of 14.1 percent beginning Jan. 1, 2009. McCarty ordered NCCI, which produces and files rates for insurers in many states, to amend the filing by reducing rates an additional 4.5 percent. According to the Florida Office of Insurance Regulation, the new reduction -- which would now total an average of 18.6 percent -- would save employers more than $610 million.

"The 2003 reforms in Florida's workers' compensation laws are continuing to play a significant role in these rate reductions," McCarty said. "In addition, positive trends in utilization and costs have helped make reductions possible."

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In his request to NCCI, McCarty cited disagreements with the methodology the council used to calculate the profit and trend factors. Trend factors incorporate changes in wages, paid losses and claim frequency.

Reforms making impact. Florida's 2003 workers' comp reform law instituted provisions for enhanced fraud compliance and revised permanent and temporary disability definitions. It also set new parameters for attorney and physician compensation and improved dispute resolution procedures, in addition to making many other improvements to the system.

Prior to the legislative reforms, Florida consistently ranked in the top two states for the highest workers' comp rates. However, McCarty said that post-reform Florida has dropped out of the top 10 rankings.

The amended rate decrease will mark the sixth consecutive drop in worker's comp rates since the Florida Legislature passed the reforms. With this change, McCarty said the cumulative statewide average rate decrease since 2003 will be more than 60 percent.

In addition, the 18.6 percent is the largest one-year decrease on record. The previous two largest decreases were 18.4 percent for 2008 and 15.7 percent for 2007. McCarty said the last six filings represent the largest consecutive cumulative decrease on record in Florida workers' comp rates dating back to 1965.

According to NCCI, the rate decline is primarily due to a significant drop in claims frequency and a reduction in the costs of claims.

November 4, 2008

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